Robusta Coffee Rallies on Forecasts for a Global Deficit

March arabica coffee (KCH23) this morning is down -0.15 (-0.10%), and Mar ICE robusta coffee (RMH23) is up +24 (+1.25%).

Coffee prices this morning are mixed, with robusta climbing to a 2-3/4 month high.  Arabica is lower on carry-over pressure from Thursday's news when Conab forecasted the 2023 Brazil arabica crop would rise +14.4% to 37.4 mln bags.

By contrast, robusta has support after Conab on Thursday forecasted the 2023 Brazil robusta crop would fall -3.8% to 17.4 mln bags.  Also, tighter supplies gave robusta prices a lift after ICE-monitored robusta coffee inventories Friday fell to a 4-1/2 year low of 6,362 lots.

Robusta also has support after coffee trader Volcafe forecasted that the global 2023/24 robusta coffee market would see a record deficit of 5.6 mln bags as Indonesia, the world's third-largest robusta producer, is expected to see its 2023/24 robusta coffee production fall to 9.1 mln bags, the smallest robusta crop in 10 years due to damage from excessive rainfall across its growing regions.

A bullish factor for coffee prices was Monday's report from Cecafe that showed Brazil's 2022 green coffee exports fell -2.7% y/y to 35.6 mln bags, the lowest in 4 years.

An excessive short position in arabica coffee futures could fuel short covering pressures after last Friday's weekly Commitment of Traders (COT) report showed funds boosted their net-short arabica coffee positions by 18,274 the week ended January 10 to 30,172, a 3-year high.

An easing of dry conditions in Brazil may boost coffee yields and is bearish for prices.  Somar Meteorologia reported Monday that Brazil's Minas Gerais region received 249.9 mm of rain last week, or 351% of the historical average.  Minas Gerais accounts for about 30% of Brazil's arabica crop.

Abundant coffee supplies are undercutting coffee prices.  ICE arabica coffee inventories have risen steadily since falling to a 23-year low of 382,695 bags on November 3 and posted a 6-1/2 month high of 859,564 bags Thursday.

Increased coffee exports from Vietnam, the largest robusta producer, are weighing on robusta prices after the General Statistics Office of Vietnam reported last Monday that Vietnam's 2022 coffee exports were seen up +13.8% y/y at 1.8 MMT.

On the bullish side for coffee prices was the January 4 report from the Colombia Coffee Growers Federation that showed Colombia's 2022 coffee exports fell -8% y/y to 11.1 mln bags.  Colombia is the world's second-biggest producer of arabica coffee beans.

On the bearish side, U.S. green coffee inventories are plentiful after the Green Coffee Association on Tuesday reported that U.S. Dec green coffee inventories rose +9.3% y/y to 6.38 mln bags.  Also, Conab on December 15 raised its 2022 Brazil coffee production estimate to 50.9 mln bags from a 50.4 mln bag estimate in Sep, up +6.7% y/y.

The USDA, in its bi-annual report released on December 23, cut its global 2022/23 coffee production estimate by -1.3% to 172.8 mln bags from a June estimate of 175.0 mln bags.  In addition, the USDA cut its 2022/23 global coffee ending stocks estimate by -1.7% to 34.1 mln bags from a June estimate of 34.7 mln bags.  

The International Coffee Organization (ICO) reported on December 2 that global coffee exports in Oct fell -1.9% y/y to 9.87 mln bags.

In a bullish factor, the USDA's Foreign Agriculture Service (FAS) on November 22 cut its Brazil 2022/23 coffee production forecast by -2.6% to 62.6 mln bags from a prior estimate of 64.3 mln bags.  This year was supposed to be the higher-yielding year of Brazil's biennial coffee crop, but coffee output this year was slashed by drought.
 

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